The A to Z of Mortgage BPO – Accenture acquires Zenta | Sherpas in Blue Shirts

Posted On August 24, 2011

Earlier today Peter Bendor-Samuel, CEO of Everest Group, posted a blog about what Accenture’s acquisitions of Zenta and Duck Creek signal for the global services industry. My goal in this blog is to drill down into specific details around the Zenta acquisition. So, with that…

Accenture announced earlier this week that it had acquired Zenta, a provider of residential and commercial mortgage processing services in the United States. The announcement also cited the launch of Accenture Credit Services, which will consist of full service consulting, technology, and BPO capabilities for the commercial real estate, residential mortgage leasing, and automotive finance industries.

Given the abysmal state of the mortgage industry – especially residential – in the United States, this is an ideal time for a large BPO service provider with sufficient cash reserves and existing low-cost delivery model to build or expand its capabilities in the mortgage servicing space by taking advantage of attractive valuations, thereby making an investment in the future. (Cognizant did exactly this last month when it acquired CoreLogic’s India-based captive.)

Think about it. The mortgage industry is facing significant double whammy profitability issues, with costs rising due to higher fulfillment expenses and the need to manage increased and changing regulatory norms, and revenue dropping due to lower origination volume (purchasing volume). The nature of services itself has changed with loan modification volume rising significantly, while new mortgage initiations have reduced dramatically. And the increased regulatory oversight, resulting from regulations such as the Dodd-Frank Act and additional proposed changes, has created an air of uncertainty in the mortgage servicing industry. Against this backdrop, Accenture’s acquisition of Zenta was certainly smart and well-timed.

The acquisition was also smart, for a different reason. Within the banking, financial services, insurance (BFSI) BPO market, Accenture has a strong position in the insurance sector which accounts for 60 percent of its BFSI BPO revenue. However, it has a fairly modest scale of operations in banking BPO, and limited capability in industry-specific capital markets BPO. With this acquisition, Accenture gains Zenta’s strong voice and non-voice experience and capabilities in the mortgage services space, which it can then infuse with its own strong consulting and technology capabilities to establish what is essentially a one-stop-shop for the mortgage industry. The launch of Accenture Credit Services is a clear step in fulfilling this objective.

With Accenture making this move in the mortgage services space – as we had suggested it might in our BFSI BPO service provider profile compendium released earlier this year – what can we expect next? Will it make further investments in banking BPO around, say, credit cards? Or will it perhaps invest in capital markets BPO, which has been a gap in its overall BFSI offering? Can it develop the capabilities organically, or may another acquisition, either a captive or pure-play niche service provider similar to Zenta, be in its crosshairs?

Yes, it’s exciting times in the BFSI outsourcing space. Stay tuned for new developments!

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